Monday, April 5, 2010

WASHINGTON — The Obama administration is delaying release of the annual report on the financial health of Social Security and Medicare so that the new report can reflect the impact of the recently passed health care overhaul.

An administration official told The Associated Press that this year's trustees report will be delayed until June 30, three months later than it usually comes out.

The official, who spoke on condition of anonymity before the formal announcement, said Monday that the delay will allow the government to determine the impact of the massive overhaul of health care that President Barack Obama just signed into law.

In January, Richard Foster, the chief actuary for Medicare, estimated that the Senate bill which passed on Christmas eve would extend the life of the Medicare hospital trust fund by 10 years. The legislation that finally passed Congress was the Senate bill but with revisions approved to win House support.

The administration official said that passage last month of the health care overhaul legislation had made the trustees report, which usually comes out around April 1, obsolete. This official said the decision was made to incorporate all of the changes made by the legislation to better reflect reality now that Congress has passed health care overhaul.

The new health care law seeks to guarantee health insurance coverage for nearly all Americans while cracking down on insurance industry abuses. It also promises to reduce federal deficits by an estimated $143 billion over a decade.

The proposal was passed without any Republican votes. The GOP has vowed to work to repeal the measure and replace it with a less sweeping proposal that they contend would have the support of a greater number of Americans who are worried that the Democratic-sponsored plan will represent massive government intrusion into health care.

Last year's report of the trustees for Social Security and Medicare, the government's two biggest benefit programs, said that the Social Security trust fund would be depleted by 2041 and the Medicare trust fund would be depleted by 2019.

The trustees warned that the financial pressures would begin much sooner when the programs begin paying out more in benefits each year than they collect in taxes. Officials with the Congressional Budget Office say that Social Security will start paying more in benefits than it collects in payroll taxes this year for the first time since the 1980s.

Supporters of the new health care overhaul believe it will have a favorable impact on both Medicare and Social Security, extending the life of both trust funds.

The benefits would occur in large part through lowering health costs by expanding the pool of people buying insurance coverage.

For Medicare, that would result in a direct benefit in lower medical bills while the boost to Social Security would occur in an indirect way. If employers see their costs for health insurance fall, they would have more money to spend on employee salaries. Higher salaries would mean a larger amount of wages that would be subject to the Social Security payroll tax.

This year's trustees report would represent the most authoritative estimate on the impact those changes will have on both Medicare and Social Security.

The report will also estimate the impact the health care overhaul will have on the premiums that Medicare recipients must pay. Supporters of the overhaul believe those premium costs will fall.

The estimate that Social Security will pay out more in benefits this year than it collects in taxes is based on budget data produced by the nonpartisan Congressional Budget Office. The CBO projects that because of a recession that cut the number of people working and paying payroll taxes, Social Security will be paying out more in benefits this year and for the next three years.

CBO analysts see Social Security returning to small surpluses in 2014 and 2015 before returning to indefinite deficits starting in 2016 under the impact of a rising number of the 78 million baby boomers retiring.

About me

I am a Resident Scholar at the American Enterprise Institute in Washington, where my work focuses on Social Security policy. Previously I held several positions within the Social Security Administration, including Deputy Commissioner for Policy and principal Deputy Commissioner. Prior to that I was a Social Security Analyst at the Cato Institute. In 2005 I worked on Social Security reform at the White House National Economic Council, and in 2001 I was on the staff of the President's Commission to Strengthen Social Security. My Bachelor's degree is from the Queen's University of Belfast, Northern Ireland. I have Master's degrees from Cambridge University and the University of London and a Ph.D. from the London School of Economics and Political Science. I can be contacted at andrew.biggs @ aei.org.